Can G-8 help poor farmers?

Barbara Ward, the distinguished writer for The Economist and a close friend of Robert McNamara, told me back in 1972 that McNamara “bled inside for what he’d done in Vietnam.” Ward was cross with me for using this quote, understandably so as this was the first time that an intimate friend had gone on the record with McNamara’s inner feelings. She went on to say that over time people would judge him more by what he was initiating in his relatively new job as president of the World Bank.

Judging from last week’s obituaries she was wrong about that. Vietnam, the Cuban missile crisis and his changing attitude to nuclear weapons dominate present day memories. Yet it is true that what he did at the World Bank is worth remembering, especially his efforts to turn aid in the direction of small farmers. Under his tenure the World Bank spent 30 percent of its budget on helping small Third World farmers be more productive. Today, as before McNamara, it spends about 10 percent. His decision had a significant knock-on effect on aid agencies everywhere.

McNamara argued that there was enough knowledge available to raise the output of small farmers by 5 percent a year — far in excess of population growth. If that had been done, it is probably safe to say that today there would be no significant poverty or hunger, as most people in the poorer Third World countries still live on the land. Instead, as the G8 said last week, the number of hungry is up near the one billion mark and too much of Western budgets is spent on food aid not long-term rural development. The G8 said they were committed to reversing that.

Taiwan, South Korea, and Egypt — the first two yesterday’s developing countries — achieved rapid success in their rural development because they had vigorous land reform and emphasized, as the backbone of their highly successful economic development, the role of the small peasant farmer.

In its research the World Bank has shown that the intensity of land use diminishes as farm sizes rise. A smaller than average farm holding and a low concentration of ownership produce an increase in output per hectare. The World Bank showed that in countries as diverse as Argentina, Brazil, Chile, Colombia, Ecuador and Guatemala output per hectare was between three and 14 times greater on the smaller farms than the larger ones.

For years the defenders of the case for larger, highly mechanized farms, have argued that land reform will end up creating a depressed peasantry, too ignorant and small-minded if productivity is to be increased. The fact is there are negative economies to scale in most farm production. Small holdings incur the lowest production costs by using family labor and making intensive use of other inputs, while also producing more output per acre. Large-scale farmers aim to maximize profits by using hired labor until incremental production covers incremental costs. This is usually less than the output per acre that would be produced if the object were to maximize profit. A few years ago Indian Prime Minister Manmohan Singh advised me to go and visit West Bengal, India’s communist-run state. Forty years ago the communists introduced land reform. These days, as I saw for myself, the villages are buzzing with activity, farmers have electricity, televisions and sometimes fridges. Somewhat amusing to my eye was to see in every village on every house flags with a red background, with a yellow hammer and sickle. Many economists and administrators will say that land reform won’t work, pointing at the dilatory performance of the post land reform peasantry in many countries. But the reason it hasn’t worked is that there is no follow up. Peasants will not know how to get the best out of their land unless they are supplied — as the larger farmers are — with new high yielding seeds, fertilizer, irrigation, micro credit and, not least, regular agricultural advice by extension agents who live on the spot.

Tragically, in McNamara’s time, the Bank was great at blue prints but incompetent at follow through. Again, I saw with my own eyes in Brazil, Bank officials from Washington on one-month visits trying to organize local officials as to what to do. Neither of them got their fingers dirty, showing the villages one by one how to do it.

McNamara’s policies earned a bad name. Despite all the money poured in, a decade later there were few successes to show for it. It will happen again with the new G8 policies, if the money is simply handed over to governments or large-scale projects run by the World Bank. First, as with the highly successful Grameen Bank in Bangladesh, the villagers must be encouraged to organize themselves for change and then summon the inputs and advice they need from government. —Arab News